On Friday, 3 February 2023, the Tax Appeal Tribunal (TAT or “the Tribunal”) sitting in Lagos held in INT
Towers Limited (“INT” or “the Company” or “the Appellant”) vs the Federal Inland Revenue Service
(“FIRS” or “the Respondent”) that a network facilities provider is not a telecommunications company
and therefore not liable to pay the National Information Technology Development Agency (NITDA) levy
pursuant to Section 12(2)(a) and Third Schedule to the NITDA Act.
Facts of the case
In 2021, INT filed its 2021 year of assessment
(YOA) returns on the FIRS’ TaxPro-Max.
Subsequently, the Company noted that the
platform assessed it to NITDA levy of
₦488,103,920.09, being 1% of its profit before
tax (PBT) payable by telecommunications
company under the NITDA Act. INT wrote to
the FIRS to clarify that it is an infrastructure
service provider to the telecommunications
companies and is, therefore, not liable to the
NITDA levy imposed on telecommunications
companies. The Company, therefore, requested
the levy to be discharged. However, the FIRS
invited the Company to a series of reconciliation
meetings to resolve the issue.
Following the meetings between both parties,
the FIRS issued a notice of assessment for the
levy computed by the TaxPro-Max. INT objected
to the assessment via its letter of 15 February
2022, wherein it maintained its position that the
Company is not a telecommunications company
as contemplated under the Third Schedule to the
NITDA Act.
FIRS disagreed with INT’s position and issued a
notice of refusal to amend (NORA). Aggrieved
with the NORA, INT filed a Notice of Appeal
before the TAT wherein it raised the following
issues for determination:
1. Whether the Appellant is a telecommunications
company liable to payment of 1% profit before
tax levy imposed on telecommunications
company by Section 12(2)(a) and Paragraph (i) of
the Third Schedule to the NITDA Act?
2. Whether this Honourable Tribunal has the
jurisdictional competence to determine the
constitutional validity of the Section 12(2)(a) of
the NITDA Act?
3. Whether the provisions of Section 12(2)(a) of the
NITDA Act are unconstitutional, null and void,
and unenforceable against the Appellant in light
of the provisions od Section 162(1) and 162(3) of
the Constitution of the Federal Republic of
Nigeria 1999 (as amended)
INT’s argument
INT argued that it is neither a GSM service provider
nor telecommunications company as provided in
Section 12(2)(a) and Paragraph (i) of the Third
Schedule to the NITDA Act. The Company noted
that FIRS’ position, which was based merely on the
fact that INT is licensed by the Nigerian
Communications Commission (NCC) to provide
infrastructure sharing and collocation services as a
network facilities provider and also enjoyed pioneer
status incentive granted by the Nigerian Investment
Promotion Commission under telecommunications
sector for the installation of telecommunications
equipment, is not supported by the extant laws.
© 2023 KPMG Professional Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private
English company limited by guarantee. All rights reserved.
INT further noted that, in the context of the
Nigerian Communication Act, 2003 (NCA), a
network facilities provider is “a person who
provides infrastructure support services to
network service providers by selling or leasing
equipment to them or granting them access to
its equipment for a fee but does not in itself
provide network services”. Therefore, the FIRS’
position that it qualifies as a telecommunications
company because its network facilities are
received by different network service providers
was erroneous, misconceived, and contrary to
the provisions of Sections 101(1) and 157 of
NCA. Consequently, the Company appealed to
the Tribunal to apply the literal rule of
interpretation to the relevant provisions of the
NCA and NITDA Act as was in the Comviva vs
FIRS (2020) case and resolve the issue in its
favour.
“Whether the Appellant is a telecommunications
company liable to the payment of 1% of PBT
levy pursuant to Section 12(2)(a) and the Third
Schedule of the NITDA Act?”
TAT’s decision
After considering the arguments of both parties,
the TAT held that:
i.
To answer the question, the Tribunal
reviewed the definitions of
“telecommunications” and
“telecommunications company” under
Section 157 of the NCA and Wikipedia
respectively, vis-à-vis the principal object of
the Company.
FIRS’ argument
The FIRS argued that INT was issued an
individual licensed by the NCC under Section
32(1) of the NCA to provide infrastructure
sharing and collocation services. Section 64 of
the Licensing Regulations 2019 defines an
individual licence as “a license for a specific
activity and may include conditions to which the
conduct of that activity shall be subject”.
ii.
FIRS noted that the service provided by the
Company was received by network service
providers such as MTN, Airtel, Glo, and
distinguishable from a service provider to
telecommunication companies as contemplated
in the Comviva vs FIRS case. Further, based on
the definition of equipment, access and network
facilities under Section 157 of the NCA, the
Company’s activity falls within the category of
network facilities provider and network service
provider in line with Section 101(1) of the NCA.
Section 157 of the NCA defines
telecommunication as “any transmission,
emission or reception of signs, signals,
writing, images, sounds or intelligence of
any nature by wire, radio, visual or other
electro-magnetic systems”, while
Wikipedia defines a “telecommunications
company” as “any business entity or
unitary group of entities whose primary
business activity is the transmission of
communications in the form of voice, data,
signals of facsimile communications by
wire or fiber optic cable”.
The Tribunal noted that, based on the
above definitions, INT is not a
telecommunications company given the
nature of its business as contained in its
principal object which includes provision of
telecommunications infrastructure;
management, provision and operation of
tower facilities in respect of assets and
operations of telecommunications
companies; provision of related
communication services for the operation
of telecommunication towers; and
installation of telecommunications facilities
such as masts, towers, VSAT and allied
equipment.
Finally, the FIRS argued that INT waived its
rights to be considered a nontelecommunications company when it benefited
from pioneer status incentive as a
telecommunications company. Therefore, the
Company is estopped by conduct from denying
that it is not a telecommunications company in
order to avoid payment of NITDA levy.
Issue for determination
Based on the arguments submitted by the
parties, the Tribunal adopted a sole issue for
determination, which was:
While INT is no doubt a player in the
telecommunications sector, however, the
issue in contention is if the nature of the
Company’s business qualifies it as a
company or enterprise liable to NITDA levy
under Paragraph (i) of the Third Schedule to
the NITDA Act.
iii.
Further, the provisions of Section 12(2)(a)
and the Third Schedule to the NITDA Act
© 2023 KPMG Professional Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private
English company limited by guarantee. All rights reserved.
are clear and unambiguous in respect of
qualifying companies and enterprises liable
to NITDA levy and, therefore should be
given their literal and ordinary meanings.
Consequently, the TAT aligned with its
earlier decision in Comviva vs FIRS and
held that INT is a network facilities
provider, and therefore not liable to NITDA
levy, which applies to telecommunications
companies as contemplated under
Paragraph (i) of the Third Schedule to the
NITDA Act. Thus, the TAT discharged the
NITDA levy of ₦488,103,920.09 assessed
on the Company by the FIRS.
Commentaries
Interestingly, the TAT did not comment on the
constitutionality of the NITDA Act, even though
both parties argued on the issue during their
submissions. This is understandable given that
the TAT lacks the jurisdiction to comment on the
constitutionality or otherwise of an Act of
Parliament. However, the TAT’s decision, which
was based on a strict and literal interpretation of
the law, is sufficient to address the main issue
of the appeal.
Therefore, pending any amendment to the
NITDA Act to include network facilities providers
as companies liable to NITDA levy, FIRS should
update TaxPro-Max to exclude network facilities
providers and other service companies operating
in the telecommunications industry from NITDA
levy accordingly.
The issue of the appropriate interpretation of
telecommunications companies covered in
Paragraph (i) of the Third Schedule to the NITDA
Act has been a subject of dispute between
affected companies and the FIRS. Network
facilities providers, such as INT, have maintained
that they are not telecommunication companies
under Paragraph (i) of the Third Schedule to the
NITDA Act as they only provide the
infrastructure used by telecommunications
companies to facilitate delivery of
telecommunication services to their customers.
However, FIRS’ position is that
telecommunications companies cover all
companies, except GSM service providers,
operating in the telecommunications industry.
The dispute has worsened since the
implementation of TaxPro-Max for tax filings and
compliance purposes as the platform
automatically assesses and computes NITDA
levy on companies deemed by the FIRS as
qualifying companies.
In the absence of any definition of
telecommunications companies in the NITDA
Act, the TAT relied on the principal object of the
Company vis-a-viz the definitions of
telecommunications and telecommunications
companies provided in the NCA and Wikipedia,
respectively in resolving the issue and arriving at
its decision. While the TAT agreed that the
Appellant operates in the telecommunications
industry, it was quick to clarify that its business
activity as a network facility provider falls
outside the scope of the NITDA Act. Therefore,
the Company should not be treated in the same
way as a telecommunications or GSM service
provider.
© 2023 KPMG Professional Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private
English company limited by guarantee. All rights reserved.
For further enquiries, please contact:
Adewale Ajayi
NG-FMTAXEnquiries@ng.kpmg.com
KPMG Nigeria – Tax Dispute Resolution Services
KPMG’s Tax Dispute Resolution Services (TDRS) team protects our clients against risks
arising from uncertainties in the tax dispute resolution landscape in Nigeria.
Our approach is designed to help you address all your tax disputes through effective
strategies that ensure proper mitigation, management and prompt resolution.
How we can support you
In today’s interconnected business environment, tax disputes with the revenue authorities
are not merely legal controversies: they have commercial considerations which require
representation and support by business savvy advisors. By leveraging KPMG’s global
network of professionals, outstanding relationships with tax authorities and the KPMG
network’s collective knowledge, our team works to help you achieve the best possible
outcomes in technical discourse with the revenue authorities, inclusive of support during
prosecution of appeals at the Tax Appeal Tribunal.
Our TDRS team comprises experienced and duly certified practitioners from various
professions, including law, accounting, finance and economics. Embedded with subject
matter experts on tax compliance and advisory services, KPMG’s TDRS team adopts an
integrated approach to helping our clients resolve their tax disputes in a cost-effective
manner.
Our services include pre-trial advisory services, representation at the Tax Appeal Tribunal,
tax litigation support and general tax dispute management.
Connect with us today to understand how our TDRS team can support your business:
Ajibola Olomola: Ajibola.Olomola@ng.kpmg.com
Ijeoma Uche: Ijeoma.Uche@ng.kpmg.com
Olatoye Akinboro: Olatoye.Akinboro@ng.kpmg.com
home.kpmg/ng
Home.kpmg/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such
information without appropriate professional advice after a thorough examination of the particular situation.
© 2023 KPMG Professional Services, a partnership registered in Nigeria and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private
English company limited by guarantee. All rights reserved.